Canadian exporters have good reason to be gloomy. Their number one customer is leading an anti-trade charge that threatens to upend not just one of the most successful trading relationships ever, but also a further-reaching global trade apparatus on which they are becoming increasingly dependent. Well, in stark contrast to this backdrop, confidence is up – and sharply. During the spring, EDC’s Trade Confidence Index lurched to its second-highest level since mid-2010. What’s up?

This jump in the Index to its current level of 76.5 marks the largest single-period movement in the Index since late-2012. This follows a sequence of yo-yo-like movements around the historical average where the series was unable to string together two successive moves in the same direction. In fact, this has been a feature of the Index through much of the post-recession period, with the exception of the 2013-15 phase where three successive gains were followed by three successive losses. These erratic movements aptly illustrate the general uncertainty that has plagued exporters in the post-recession world.

Exporters are pumped about sales

What’s powering the increase? It’s all about activity. Export sales are up, and that seems to have our survey respondents pumped. They are equally encouraged by robust domestic sales. The sales optimism is true right across the industry spectrum, it spans the country and is the case in all sizes of firm. And in spite of negative messaging from south of our border, the vast majority of orders from the US are either increasing or staying the same. When it comes to actual market conditions, however, exporters are less sanguine. Perceptions of near-term domestic conditions actually eased back, while the same measure for global conditions was a shade higher. Similarly, the international business opportunities measure moved up, but marginally.

The tentative view of the near-term tells quite a story. Sales may be doing well, but uncertainty is weighing on exporters’ ability to meet future demands. Investment is at risk, in a state of trade-war limbo. More Canadian exporters are signalling stronger investment intentions, and there was a significant jump in the share planning to invest outside the country – in the US and elsewhere. But nearly one in five exporters say that the NAFTA talks have had a negative impact on their investment plans. Of this group, one-third said that they are delaying investments.

Foreign buyers want Canadian stuff

While a majority – 63 per cent – of those polled in the survey believe NAFTA talks have had no impact on their operations, the share experiencing a negative impact has grown from 23 per cent to 28 per cent of the total. However they are feeling about existing trade, Canada’s exporters are looking further afield for business. In this survey, there was a notable increase in the share of exporters that are already exporting to new countries, and in those who are planning to do so. The key reason for this was not to bypass current trade policy mayhem, but was because of demand; no other reason came close. The top two markets Canadians are planning to go to? The US is actually third-ranked behind China and the UK.

Other concerns cited by exporters include interest rates. Fully 30 per cent of respondents expect interest rates to negatively impact export sales, up from 21 per cent in the last survey. Even so, very few think they can do much about it – 40 per cent say that in spite of the effects, they plan to do nothing about it.

Another growing difficulty is access to labour. One-third of respondents are now saying that they are finding it very difficult to access skilled labour, a share that has risen sharply in the past two surveys to a level well beyond anything seen since 2012. This is consistent with the findings in the Bank of Canada’s Business Outlook Survey, which is citing similar growing angst.

The bottom line?

On the surface, Canadian exporters seem happy. Look a little deeper, and things could sour quickly – either from a growing inability capacity-wise to service burgeoning demand, or from a negative turn in policy. It’s notable that this survey was conducted ahead of the June 1 announcement of steel and aluminium tariffs. While these industries affect a relatively contained share of the exporting community, an escalation could have more serious consequences. For now, enjoy the good times, but watch this space.